Friday, May 11, 2012

Cash Back Credit Card

I have always been a fan of Credit Cards with Rewards program.  I have carried a Discover Card for the last 5 Years or so.  I like it for the following reasons…
  • Earn Cash Back or Gift Cards to popular retailers.
  • The Website is SUPER easy to use.
  • Online payments and statements. Once I opted out, I never received any bills, offers, other junk mail from them.
  • Breakdown of Purchases. Discover puts all of my purchases into categories so I can see where I spent my money for the past month.
The only drawback is some places will not accept Discover, with the list getting smaller all the time.  The reason is Discover charges business more to process the payment, which is good for you.  They then pass the savings to you and not the business.  I also have a MasterCard, which I only use as a back up.
To give an example, I make all of my purchases with a Discover Card and get about $40 back each month.  That’s almost $500 in free money each year! And if I pay off the balance each month, I have nothing to lose.

Buying in Terms of Time

I have had my eye a new LCD 42″ TV for the last year.  I told myself to wait until they are priced under $700.  The day after thanksgiving I had my opportunity.  Multiple stores were offering my desire.
So did I buy it?
No. Because I realized what that $700 TV actually cost me.
Let’s say I make $20/ hour.  I would have to work 35 hours just to make $700.  So is 35 hours worth it?  Maybe…
WAIT, there’s more.  What about the taxes? Let’s say I’m in the 25% Tax Bracket.  That TV just cost me 46.5 hours of work.  Now, is it worth it? Maybe…
WAIT, there’s still more.  What about the opportunity to use the money elsewhere.  This is also called opportunity cost.  Instead of buying the 42″ TV, I could…
  • Pay Rent
  • Earn Interest on it and have More Money Tomorrow
  • Apply to a Car Loan or other Debt
  • Start a Retirement Account and Earn Money, Tax Free
I figured I watch about 1-2 hours of TV a day on a 27″ tube TV.  To me it wasn’t worth it to pass up the other opportunities.  Maybe someday I will get the beautiful, sharp, crisp 42″ LCD, but for now I can hold out.


Via Punxutawneyphil
Via Punxutawneyphil
I love saving money by shopping at discount stores. But is it worth the hassle? Sometimes.
Just like most things in life, saving money involves trade-offs.
Example 1: I like to shop at a discount grocery store but it is located across town from me. I also have another option that is a couple blocks away but more expensive. If I only need a couple things, it’s not worth the drive, gas, and TIME to save a $1 or 2.
Trade-offs are a decision between how much you can save vs. how much you will spend to save that amount. I like to do this for a lot of purchasing decisions in my life.
Example 2: Recently, I was looking for a purchase of around $200-$300. Instead of spending 5 hours researching and tracking down the perfect deal, I decided to save my time and just buy from a store I had good experiences with in the past. Sure, I could have found a better deal (10-20% less) if I had invested the time. But for me, my time (5 hours) is worth more than $40.
What are some trade-offs you have found not worth the hassle?